
Market Temperature: Nippy
2008 M&A Pace Matches
2007.
By
Audra M. Szollosy
Looking towards the finish
line.
Deal activity remained dull with 17 transactions during
November—the fifth month in 2008 with fewer than 20
deals. Between Sept. 1 and Nov. 30, 59 deals were announced for
a year-to-date market barometer of 253 transactions—even
with last year’s pace.
Given the recent M&A slowdown, at first blush it may
seem surprising that 2008 has been as active as 2007. Will it
surpass 2007’s record 264 deals? The financial turmoil
around the globe has effectively frozen many lending sources,
which has hampered funding and, consequently, prevented many
deals from being consummated.
Active buyers continue to decline while the number of
first-time buyers continues to rise. Insurance brokerages
account for 63% of consolidation over the three months ending
in November. The three usual suspects—Brown & Brown,
Arthur J. Gallagher, and Hub International—accounted for
a third of the buying. Twelve first-time buyers emerged, each
acquiring one agency. A new buyer with a familiar name appeared
on the scene. Global insurance broker Marsh is launching its
new retail operation Marsh & McLennan Agency in the first
quarter of 2009. Marsh chairman and CEO Dan Glaser says the
agency will be active in acquisitions of smaller agencies.
Wells Fargo announced one transaction in November, bringing
its year-to-date total to eight, equal to BB&T’s
efforts. Bank buying is down 25% from last year, and it seems
unlikely it will rekindle anytime soon.
Insurers picked up the pace a bit in November acquiring four
agencies. Insurers continue to acquire in their comfort
zone—MGAs, MGUs, and program administrators with whom
they have done business—or where they can expand
specialist distribution channels. Such is the case with this
year’s third largest transaction by deal value. QBE
Insurance Group acquired ZC Sterling for a total potential
purchase price of $900 million. ZC Sterling is a niche
insurance underwriting agency specializing in lender-placed
property insurance. Incidentally, ZC Sterling purchased an
agency in October. The hunter becomes the hunted.
Other buyers’ activity is down 44% year-over-year.
This category is led by LTC Global Solutions having acquired a
total of five life and health and long-term care agencies.
There have been three private equity investments so far this
year compared to seven last year. None compare to the monster
transactions of Hub International and USI Holdings being taken
private in 2007.
I will summarize full-year 2008 results in the next issue.
Look for our in-depth “2008 Year-In-Review” with
the April issue of Leader’s
Edge. While no one knows for sure what 2009 holds for
insurance brokerage M&A, a few things are certain. It is
estimated that only one fourth to one third of agencies have a
formal perpetuation plan; the number of agency owners nearing
retirement age continues to increase; and smaller agencies
often lack sufficient leverage with carriers. Perhaps
consolidation can be added to those other two things we can
always count on.
Send your M&A announcements to Audra Szollosy at Audra.Szollosy@LeadersEdgeMagazine.com
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